Market Focus: DSP makers' forward spin on the market

Market Focus: DSP makers' forward spin on the market
By Bill McIlvaine, EBN
November 9, 2001 (2:14 p.m. EST)
URL: http://www.eetimes.com/story/OEG20011102S0059

For DSP makers experiencing their first annual sales decline, it's been the worst of times. But they are making the best of it by taking stock of their product development programs and business strategies to be ready when the market rebounds.

Although many OEMs are pushing back or dropping programs, DSP vendors realize the need to find creative ways to drum up new business.

“OEMs know that when they come out of the downturn, they want to make sure their products are feature-rich,” said Gerald Maguire, product line director of the DSP Division at Analog Devices Inc., Norwood, Mass. “They're looking to provide the highest possible performance and integration to get the edge on their competition.”

The same holds true for developers of DSP intellectual-property cores-a business that is increasing as DSP becomes more pervasive.

“Customers are telling us they don't know when they'll come out of this, but when they do, they expect to see more advanced product lines,” said Gideon Wertheizer, executive vice president of DSP Group Inc., Santa Clara, Calif.

DSP Group, an IP developer, has not canceled any product plans, but has moved development teams into areas such as consumer products, he said.

The current environment is unquestionably the most challenging DSP suppliers have ever faced. This year, for the first time ever, single-chip DSP sales will decline, said Will Strauss, an analyst at Forward Concepts Co., Tempe, Ariz. The market researcher forecasts a 30% drop in worldwide DSP shipments this year.

In 2000, the market gained a whopping 40%, to $6.1 billion on shipments of 918 million units, according to the Semiconductor Industry Association, San Jose.

This year worldwide DSP revenue will be only about $4.3 billion, Strauss said, with unit shipments totaling just 426 million through August, the SIA reported.

Price erosion has not paced the sales decline. Average selling prices hit a low of $5.92 in July after peaking at $ 7.09 in June, but rebounded to $6.37 in August, according to the SIA.

Lead times have shrunk by half, from 11.6 weeks in January to 5.7 weeks in July, according to EBN research. Figures for August weren't available.

Different types of efforts

Measures to shore up sales vary.

Analog Devices in April created its DSP and Systems Products Group dedicated to general-purpose DSP and vertical market DSP system-level products. “Bringing all the internal, vertical business groups that touch on DSP under one management team, we can leverage as much as we can in the DSP space,” Maguire said.

LSI Logic Corp., a recent entrant into the DSP arena, is using the downtime to consolidate its product line, said Neal Stollon, ZSP core and technical marketing manager in Milpitas, Calif.

The company's efforts are concentrated on “productizing” its ZSP core, which it acquired in the 1999 purchase of ZSP Corp. However, LSI Logic has dropped its line of DSPs aimed at digital still cameras.

Improv Systems Inc., a four-year-old DSP IP developer, is shifting some of its marketing emphasis from larger customers, including LSI Logic, to smaller fabless companies, said Cary Ussery, chief executive of the Beverly, Mass., company.

“They don't have the option of postponing their projects. It's a better market for us right now,” he said.

Suppliers of DSP silicon and IP believe they can innovate their way out of the downturn. “We made a conscious effort to maintain all of our R&D spending,” Analog Devices' Maguire said.

Microchip Technology Inc., Chandler, Ariz., increased its R&D by 1% for its new digital signal controller, the company said.

DSP Group is investing heavily to increase its software solutions, Wertheizer said. Just offering baseband processor technology is not enough anymore, as fast-moving customers want more complete solutions. “They're not as willing to shop around for components. They want one window. We're working like crazy to get prepared,” he said.

The company recently announced a complete solution for digital still cameras, including software and development tools.

While some OEMs have backed off their new-product plans, tier-one customers have not slowed their development, said Neal Epstein, marketing manager for the imaging group at Oak Technology Inc., Sunnyvale, Calif.

Oak sold its broadband communications DSP business in 2000 to focus on optical imaging and printing. The downturn has not caused the company to change its strategy, Epstein said. As the market leader in optical imaging DSPs, Oak is not trying to take business from Texas Instruments Inc. or Motorola Inc., but is looking to beat them to new markets, he said.

Oak's new Quatro DSP architecture is targeted at digital imaging systems such as scanners and inkjet multifunction peripherals that work independently of a PC.

The worldwide market for “PC independent” peripherals is expected to grow from 11 million units in 2000 to 44 million units by 2004, according to IDC, Fra mingham, Mass.

With an integrated ARM9 processor core, the company has created a system-on-a-chip (SoC) platform with supporting software development tools that it hopes will replace hard-wired ASICs. The Quatro DSP was built for processing data generated from image sensors such as charge-coupled devices.

Also pursuing emerging DSP markets, IP start-up Improv Systems Inc. in October rolled out its second-generation Jazz DSP technology for wireless LAN, video, and voice applications.

The new Jazz DSP uses a streamlined 16-bit version of Improv's 32-bit architecture launched last year. Like its predecessor, the new DSP architecture is aimed at SoC designs and is highly scalable for multiprocessor ICs, Ussery said.

Philips Semiconductors recently invested $9 million in Improv Systems even though the company has its own DSP technology, Real DSP, which is targeted at the 3G wireless handset market. “It was critical technology for them, and good timing for us,” Ussery said.

Texas Instruments has designs on the video space. “One of the things we're seeing on the infrastructure side as it relates to broadband is the increasing content of imaging video, and that's playing right to some of the finer points of the architecture changes we made to the 6000 family,” said Greg Delagi, vice president of TI's DSP Semiconductor Group in Dallas.

One of three new C6000 DSPs TI announced in September is the highest-performing DSP on the market, at 600MHz, Delagi said. It is being targeted at video servers and video infrastructure systems.

And TI, though it owns almost 60% of all cellular phone design-ins, according to Forward Concepts, is also investing in broadband communications such as DSL, 802.11, and voice-over-IP, Delagi said.

Taking aim at microcontroller-based applications such as motor control, Microchip Technology last month introduced a hybrid MCU-DSP, the dsPIC, it's first DSP and first 16-bit MCU. One key market for the dsPIC is industrial-equipment companies moving to sensorless mo tor control, said Steve Marsh director of marketing at the company's digital signal controller division.

“In these uncertain times, people are driven by costs, and one of the strategies they take is getting the sensor off the motor and putting in low-cost electronics so the compute power goes up,” he said.

“We're encountering customers that traditionally use MCUs that are wishing to take advantage of DSP features but don't want to have to learn digital signal processes,” Marsh said. “So we came up with a middle ground. We didn't want to call it a DSP, yet is has DSP resources, and it's more than an MCU, so we called it a digital signal controller.”

Analog Devices and Motorola have already been mixing DSP and MCU in hybrid architectures. Analog Devices' new Blackfin DSP architecture, which it is now sampling to customers, combines the flexibility of an MCU and the control-code functionality of a DSP, Maguire said. Blackfin uses Analog Devices' implementation of the Frio DSP core, based on the Mic ro Signal Architecture, that it co-developed with Intel Corp. Blackfin currently is aimed at handheld computing and communications devices, and Analog Devices is setting its sights on cell phones, Maguire said.

Motorola is also taking a hybrid approach with some of its DSPs.

“We saw the need for low-cost solutions, either historic MCU capabilities that require DSP, or low-end DSP functionality where the price is being driven down but customers want more DSP functionality,” said Michael Ponzo, marketing director at Motorola Semiconductor Product Sector's DSP Division in Phoenix. “It addresses not only network processors and baseband processors, but we're now inserting it into market spaces that hadn't traditionally been serviced by DSPs. So what we're doing now is making the DSP solutions look very much like traditional MCU solutions.”

Waiting on 3G

Although emerging applications will help spur growth once business rebounds, the DSP sector will continue to rely heav ily on cell phone demand. Despite this year's weakness in that market, the long-term prognosis is good.

One bright spot is the emerging 2.5G wireless transmission specification, which boasts data transmission speeds approximately five times faster than current cell phones, enabling applications such as Web browsing, electronic banking, and video games.

While 2.5G has been slow to roll out in Europe and the United States, analysts predict that the technology will prompt new cell phone shipments, not just replacement sales. Third-generation (3G) phones are expected to ignite more sales but so far have debuted only in Japan.

Chipset vendors are sanguine about 3G technology because it will require more powerful, more expensive chips, said Andy Fuertes, an analyst at Allied Business Intelligence, Oyster Bay, N.Y.

Motorola is making its first big push into the merchant cellular handset market and sees this move as a springboard to 3G.

Motorola is not planning to use its StarCore DSP architec ture in its new 2.5G chipsets. The StarCore architecture is considered overkill for 2.5G phones.

Motorola will use the StarCore architecture in its upcoming 3G chipset, Ponzo said.

Agere Systems Inc., Motorola's partner in the StarCore venture, declined to discuss whether it had similar plans.

Agere struck its most significant 2.5G deal with NEC Electronics Inc. in July for its Class 8 GPRS technology platform, which enables data transmission rates of up to 50Kbits/s. Ultimately, GPRS service is expected to allow data connection at speeds up to 115Kbits/s.

Agere is working closely with NEC on the fabrication process, according to Lawrence Rigge, director of advanced development for mobile wireless solutions at Agere, Allentown, Pa.

“In a time of difficulty, you form partnerships,” Rigge said. “You gain expertise, you secure business relationships, and you unite efforts toward a common goal.” NEC's 2.5G handset was among the first to roll out in Japan in October.

The current slowdow n is provid-ing the opportunity for companies to regroup.

“The vendors have been in a mad race for the past two or three years, to deploy leapfrogging technology that at times was too fast and not as robust as it could be,” LSI Logic's Stollon said. “This allows us to take the time and make sure the products are as good as they could be.”